I was wrong … this time it’s different.
In a post in November I likened today’s arms race for talent to feeling like 2006/7 all over again, with the inevitable repeat at some point of 2008’s violent swing the other way.
But recently published data around last year’s law firm partner lateral hiring has made me think again.
Paul Deacon’s report on London-market partner moves in 2021 shows that volumes returned to record pre-pandemic levels, which broadly reflects the data coming out of the Am Law 100 firms in the US. Whereas a wider sample of the top 200 US firms shows an increase of almost 50% on pre-pandemic volumes.
On one level this is reflective of a huge boom in work - like 2006/7, only much bigger. On another level, this is a different type of storm in the people market – and a perfect one in relation to partner hiring, driven by the impact of the pandemic.
The frenetic scramble for associates to staff today’s exceptional dealflow, whilst unedifying, dislocating and ultimately destructive for everyone, is episodic and will pass. Whereas the effects of the pandemic on partner lateral hiring have the potential to produce some sudden and major long-term shifts in law firm competitive advantage.
The bonds tying partners into firms and teams have loosened at the same time that entirely different ways of working have made the world smaller and partners both more accessible and open to change. Firms, partners and clients are much more flexible than they were. Five or even ten years’ of change in attitudes and habits has been forced into months. And a lateral hiring process which could have taken months might now be compressed into just a few days.
But what I worry will not be different this time around will be the statistical failure rate attaching to today’s hires.
ALM/Decipher’s 2019 US study into law firm lateral hiring should be compulsory reading for managing partners and potential candidates on both sides of the Atlantic. It would suggest that, statistically, around half of today’s hires will fail (in that they will no longer be at the hiring firm in five years) and two-thirds will underperform on expectations.
These are indisputably terrible odds - the equivalent of tossing a coin. And for sky high stakes - exceptional compensation packages (now including golden hellos on top of guarantees – remember Dewey LeBoeuf?), agent’s fees of 20-25% and invaluable managing partner political capital.
The American Lawyer has suggested that in 2021 the operative question for the legal industry shifted from ‘whether’ to lateral hire to ‘how much’. That’s understandable – it is the go-to growth strategy for most firms and, done well, it can be transformational.
But perhaps the operative question for managing partners in 2022 should be ‘what do those comparative few who win at lateral hiring do differently?’.
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